Bendix Corp. made a surprise $1.5 billion offer yesterday to buy Martin Marietta Corp., the Washington area's largest industrial corporation.
Martin Marietta is expected to fight the takeover attempt. Officials of the Bethesda-based company had no comment on the offer except to say that the company's board would consider it at an unspecified date.
Bendix, a diversified conglomerate based in Southfield, Mich., with interests in auto parts, electronics and machine tools, has been seeking for some time to purchase a large defense contractor. It would get that in Martin Marietta, which through its aerospace division is a major contractor on more than a dozen defense and space projects, including the MX missile and the space shuttle. Martin Marietta's $3.3 billion business also includes cement, aluminum and chemicals.
A merger of the two would create a company whose 1981 sales totaled $7.7 billion, ranking it 45th among the nation's industrial concerns. In terms of the dollar volume of defense contracts, the combined company would rank ninth, with defense contracts worth $1.74 billion in fiscal 1981 -- plus millions more in nondefense space business.
Bendix Chairman William M. Agee made the takeover offer in a letter hand-delivered to Martin Marietta management yesterday morning. A Bendix spokesman would not say if there had been previous talks between the two companies, but Agee said he was now willing to meet with Martin Marietta officials to discuss the deal.
Bendix already owns about 4 1/2 percent of Martin Marietta's 35.8 million shares and is the largest single shareholder of the company, most of whose shares are owned by institutional investors.
Bendix proposed to pay $43 in cash a share for 45 percent of Martin Marietta in an offer beginning today. The company then plans to complete the acquisition by exchanging 0.82 percent of a Bendix share for each remaining share of Martin Marietta stock.
Martin Marietta stock closed on the New York Stock Exchange yesterday at $39.25 a share, up $6.12, with nearly 1 million shares changing hands. Bendix fell $2.50 to $50.
In his letter, Agee said he hoped Martin Marietta's management would remain after a merger, and a Bendix spokesman said a merger would not result in any immediate cuts in Martin Marietta's workforce. The company has 41,200 employes, 3,200 of them in Maryland.
Industry analysts who specialize in Martin Marietta expect the company to mount a spirited defense to the unsolicited offer.
"I don't think [Martin Marietta President] Tom Pownall would want to lie down and play dead," said Robert Maloney, an analyst at Wood Gundy Ltd., a stockbrokerage in New York. "It's a question how much Agee really wants to fight for this thing."
"It's a shrewd move by Mr. Agee, if he's able to do it, but I don't think Martin needs him," said Francis L. Carey, an analyst at New York's Fahnestock & Co.
Analysts said Bendix's offering price was too low and said the company would probably have to up the ante if it hoped to make the deal. "I think everybody agrees the price is too low," said Carey, who believes a price of as much as $55 or $60 a share would be more reasonable. "I've talked to some of the large shareholders, and they're not at all enthused at that price."
Martin Marietta shares have traded as high as $50, but the stock has been in the 20s lately because the recession has forced the aluminum, cement and stone products divisions into the red this year.
Analysts said Martin Marietta had several options to force Bendix to drop the offer or increase the price, such as raising legal challenges or purchasing another company, which could make Martin Marietta less attractive to Bendix.
They said, however, that some other lines of defense are not available to Martin Marietta. The company does not have enough cash to buy up large blocks of its own stock, a common anti-takeover tactic. It is also not considered likely to go out and find another company to make a competing offer -- a "white knight" in takeover parlance.
"I don't think they want to be acquired, and I don't think they'll go out looking for someone to acquire them," Carey said.
Because there was no indication that Agee had made any private overtures to Martin Marietta before making the offer, the seemingly "hostile" takeover attempt surprised some analysts who follow Bendix.
Agee, his company cash-rich as a result of the divestiture of its forest-products division and a 20 percent stake in Asarco Inc. two years ago, has been seeking to buy a defense or high-technology company.
Earlier this year Bendix increased its holdings in RCA Corp. to 7.3 percent, arousing fears among the communications company's executives that Agee intended to make a bid for RCA and prompting a stinging warning from RCA Chairman Thornton Bradshaw. But Bendix said it had no intention of trying to take over RCA.
The Bendix analysts said Martin Marietta fits well into Agee's plans for Bendix. "From a conceptual point of view, this is a very nice acquisition," said Bruce Jordan of Merrill Lynch Pierce Fenner & Smith. "It's an area they would like to be a bigger player in. To date they are a subcontractor, and they would like to be a prime contractor. Acquiring Martin Marietta will accomplish that."
But the analysts questioned whether Bendix, if the merger went through, would keep Martin Marietta's cement, stone products, aluminum and chemicals businesses, which have been suffering in the recession.
"The attraction is the aerospace business. If this acquisition occurs, what their intentions are for the other operations, I don't know," Jordan said. "Whether they'll keep them, whether they'll sell them off, whether they'll push them into the Hudson River, I don't know."